CRAs fight decay but divert millions in taxes from counties

Planners and developers call CRAs -- 15 in Volusia, four in Flagler -- effective tools for rejuvenating blighted areas, but Volusia County Chair Jason Davis says they "lay an undue burden of taxation on our residents."

DEREK CATRONSTAFF WRITER

Chef Clay Butters was thinking first-class when he opened Martini's Chophouse. He wanted a modern cuisine experience, with lots of local and organic ingredients and an Art Deco setting that wouldn't be out of place in South Beach. He wasn't in South Beach, though. He was in South Daytona, on a street better known along stretches in Daytona Beach as a haunt for low-rent motels and prostitution. "You tell people you're on Ridgewood Avenue," he said, "and they say, 'Oh.' " To overcome that reaction, Butters and his wife, Claudia, created something of a culinary oasis, building a tree-shaded garden dining area with an elaborate wood deck, fire-pit table and a 20-foot Zen water wall. The goal was to help patrons enjoying grass-fed filet or blue crab and lobster ravioli forget where they were. But now, after eight years at their new location, Butters is just as enthusiastic talking about the front of the restaurant. He said new customers are discovering his oasis following the completion last year of a streetscape project on South Daytona's northern end of U.S. Highway 1. "The palm trees, the lights, the underground utilities — it's beautiful," he said recently during a brief break in readying for a Friday night dinner crowd. "It's a new influx of customers we're seeing, and I'm hearing the same thing from other restaurants. If your street looks bad, people aren't going to want to come there. But this, it makes you feel like something is happening in the area." Technically, it's South Daytona's Community Redevelopment Area, one of 15 CRAs in Volusia County — plus another four in Flagler County — that are used by cities to help revitalize blighted areas. Volusia's special districts have helped raise $165 million over the last decade in support of projects like building or expanding hotels and condominiums, razing crime-ridden properties or beautifying areas with fancy streetscapes and fašade grants. Planners and developers call CRAs one of their most effective tools for rejuvenating blighted areas, and cities are practically lining up for new ones. Deltona, Orange City, Edgewater, DeBary and New Smyrna Beach are in various stages of discussions over new CRA proposals. But getting a new CRA may not be as easy as it used to be. The Volusia County Council — which must sign off on new projects — has tightened its oversight of the areas in recent years. The council will discuss CRAs at Thursday's meeting, the first chance a council that includes four new members will have to hash out their views on the issue. For all the good the special districts can do for cities, their benefits to the county are not as clear-cut. Of that $165 million going into CRAs over the last 10 years, only 40 percent of it came from city taxes on properties within the area, according to figures maintained by the Volusia County property appraiser's office. The rest of the money, critics note, would have been earmarked for other agencies — $100 million that could have paid for county services, hospitals — or used to lower the tax burden for everyone. Property Appraiser Morgan Gilreath questions just how good a deal CRAs have been for Volusia residents, noting they have "an upward impact" on property tax rates throughout the county. "I don't think (a large) percentage of people in this county realize their tax dollars are going to fund projects in cities where they don't live," he said. New Volusia County Chair Jason Davis was an outspoken critic of CRAs during last year's campaign. "They lay an undue burden of taxation on our residents," Davis said. "I don't see how I can support any of them. ... I'm not here to increase taxes; I'm here to lower them." But CRA supporters say that, when done right, they're a boost to the tax base rather than a drain on taxpayers. More importantly, as South Daytona did for Martini's and other Ridgewood Avenue businesses, they can bring pride to areas that were once a source of shame.

STOLEN MONEY?

To understand the arguments for and against CRAs, you have to understand how they work. When a city creates a CRA, the tax base within the area's boundaries becomes a baseline. As the area grows more valuable, through new growth or rising property values, the city and county taxes generated beyond the baseline stay within the district. (School taxes are unaffected.) An example: Daytona Beach created the Main Street Redevelopment Project Area in 1982 — the county's first CRA, encompassing beachside properties between International Speedway and Oak Ridge boulevards. The area had a tax base worth nearly $69 million. Thirty years later, its taxable value stood at $306 million. The higher value generated nearly $56 million in property taxes over the last 10 years. Most of that money — nearly $32 million — would have gone to Volusia County or the Halifax hospital taxing district, had it not been diverted into the CRA. Former County Councilman and radio show host Big John has a blunter way to describe the transfer of tax dollars from the county to the cities' CRAs. "I prefer to say 'stolen,' " said John, who served 12 years on the council and believes he was voted off in 2002 in part because of his opposition to CRAs. "Cities have been using the stolen money for their own slush funds for years." But that argument misses the point of why a CRA exists in the first place, said Reed Berger, the redevelopment director in Daytona Beach, which, with five CRAs, has the most in the area. The special nature of the area's funding, Berger said, is that it pays its way with money that wouldn't exist without the projects a CRA attracts. Perhaps the area's best example is how the city borrowed against anticipated tax revenues to pay $26 million to help fund public areas in the Ocean Walk project. An area once a notorious haunt for pedophiles is now the site of two condo towers and a retail-and-restaurant complex valued last year at just over $100 million on the property appraiser's tax rolls. The Ocean Walk properties accounted for nearly $1.5 million in revenues for the CRA last year. While it's true the county didn't get any of that money, in Berger's view the county didn't lose anything, either. Without the CRA, Ocean Walk wouldn't be there, he said. "People are making an investment they otherwise wouldn't make," Berger said of the deals that can be negotiated in CRAs. "There are more resources (in these areas) today because the county and city agreed we need to make this commitment to the area." Yet even with all of the investment into the area, the Main Street CRA remains one of the county's biggest eyesores. Its value, over the last 10 years, has declined slightly — by 2.6 percent — while Daytona Beach was up 1 percent overall and the county as a whole increased 10 percent for that period. Of the 12 CRAs that have been around for at least 10 years, only half experienced growth rates that were as good or better than the county or city as a whole, giving ammunition to critics who say the usefulness of CRAs is overstated. "It might be a tool to fix blight, but it hasn't happened here," Big John said. John's argument is particularly pertinent in areas that are less obviously blighted than Main Street. The state created CRAs as a tool for dealing with "slum and blighted areas" that contribute substantially "to the spread of disease and crime," according to Florida statutes. The negative association was so strong some cities rejected the CRA option. In 2004, hundreds of residents turned out to city meetings in DeBary to urge council members against affixing the blight label to their city. When an area is truly blighted, Berger said, the incentives that can be offered through a CRA may be the only way to spark new development. "You want to seed some of the first projects to kick start development," he said. "This isn't something that you want to do forever and ever. But you hope to build confidence for other developers to come in." But the rules that govern CRAs have grown more flexible with time, addressing a wider array of concerns and making the option palatable to more cities. "We've gotten really lax on that definition," said developer Jack White, whose White Challis Redevelopment Co. prefers to only work with CRAs because of a philosophical commitment to redeveloping urban areas. "Not everywhere (that needs help) is blighted, like a core urban area. When you start getting too far from that intent, you water down your original objective." Among the local CRAs is downtown DeLand, otherwise marketed as "the best downtown around" by its merchants association. New Smyrna Beach's CRA includes most of the city's waterfront loop. In the Ormond CRA, you can stroll through the Rockefeller Gardens and enjoy a variety of fine-dining options. In Flagler County, Palm Coast's CRA includes ongoing new development at the sprawling Town Center project. All have seen improvements as CRAs, but critics wonder if that designation was necessary. "The question you have to ask," Big John said, "is: Does the county have to give up that tax money for redevelopment to occur?" Without singling out a specific CRA, Gilreath said it appears some cities have used the designation more as an economic development tool than a fix for truly slum-like conditions. "Legally, they have to have a blight study," he said. "Some of the blight studies don't pass the common sense meter on what is a blighted area. You can hire a consultant to tell you just about anything you want to hear. In some cases, it looks like that might have been done." Gilreath said he supports the concept behind the law. Creating a CRA can be an effective tool for restoring a blighted area, he said, even when it means pouring in tax money from other jurisdictions. "It's like taking food to a needy neighbor," he said. It's difficult to remain generous, he added, if you find out the neighbor is eating better than you.

SLOW PROCESS

The biggest supporters of CRAs point out that they've had to follow rules established by the state or county and that the ultimate benefits of higher property values are shared throughout the community once the CRA ends (which can be 30 years or longer). In South Daytona, City Manager Joe Yarbrough saw problems with crime and code enforcement in the area that should have been the city's economic engine. Creating a CRA in 1997 provided funds that helped clean up the area, making it better suited for new development or improvements, he said. "The whole idea is to revitalize, and it's a slow process," Yarbrough said. "You've got to start out by stabilizing it. Things like special policing and code enforcement. Things to reduce crime and halt the deterioration of property values. To stabilize it, like a patient." Later, CRA money paid to put utilities underground along the northern stretch of Ridgewood in South Daytona. CRA money helped the city match grants from the state Department of Transportation for a streetscaping project that added new trees and decorative lighting and brickwork. From a $116 million base in 1997, the South Daytona CRA has grown to a value of nearly $178 million, an increase of more than 50 percent, even before the effects of the street improvements can be felt. "The whole idea is to create an area that you want to live in or that you want to stay in. It's not only recruitment, it's retention," Yarbrough said. "I think what a CRA does for a developer or investor is it gives them a feeling of opportunity. They see they are in an area designated for a lot of attention and they know the future has every reason to be bright." The future for new CRAs in Volusia might not be so bright, though. While the county can't change the 15 CRAs already on the books, getting news ones approved may be especially challenging. Deltona, Orange City and Edgewater could be seeking to create CRAs this year. DeBary officials have discussed the idea. New Smyrna Beach may ask for a new one, once its existing CRA ends in 2015. With so many in the wings, County Manager Jim Dinneen said the council needs to make a philosophical decision. In a time when finances are so tight, the council may not be able to afford to be as generous in permitting CRAs. "Once you open that door to one, you're going to deal with all of them," Dinneen said. "The council has to look at these (in light of) where our revenues are and where they're going. The council can't make decisions in isolation. They have to make decisions in relation to all the (other) things tapping county revenues. "What you did (at) one time," Dinneen added, "you might have to say we can't do it anymore." Councilman Josh Wagner, whose east Volusia district includes more CRAs than any other, is torn by the issue. "I support the concept," he said, especially since the council has pushed for more oversight over the last few years and set stricter parameters for how long a CRA would last and what the county would contribute. "I won't say I won't vote for any new ones," he said. But what Wagner added was telling of the council's current view. "If some of these CRAs were to come back," he said, "I'd have a difficult time supporting them. ... I'm looking forward to their expiring."